Companies Concerned About CEO Pay Ratio Disclosures

October 10, 2013 (PLANSPONSOR.com) – The Securities and Exchange Commission (SEC) proposed a rule requiring public companies to disclose the ratio of their CEO compensation to the median compensation of all other employees, as required by the Dodd-Frank Act.

The majority of U.S. public companies are concerned about
the cost and effort of compliance, not shareholder reactions, according to a
poll from Towers Watson. Only one in 10 employers
expect this disclosure will provide valuable information for investors and
companies, Towers Watson found.

Fifty-six percent of poll
respondents said they are most concerned about the process of complying with
the new disclosure requirement, especially collecting the pay data, deciding
how to approach data-sampling and determining the median employee. Only
one-third of respondents (34%) said they are comfortable they will have
the information necessary to comply by 2015.

“Determining the best approach
to identifying the median employee and calculating a pay ratio will be no easy
task, especially for large global companies,” said Todd Lippincott, North
America leader of executive compensation at Towers Watson. “In fact, only two
in 10 poll respondents agreed that they understand all of the costs, effort and
data needed to comply with the new rule.”

Others worry about how their
CEO pay ratio will compare with their peers’, the industry’s or the
marketplace’s (31%); and one-fifth (21%) said explaining the process of
determining the ratio to their shareholders is their biggest concern.

Towers Watson polled 375 corporate
executives and compensation professionals regarding the ruling during a
national webcast October 1. The SEC will accept public comments on the
proposed rule until December 2.